What's the reality of today's increase in AS to 250 million
Post# of 7769
Posted On: 04/28/2014 10:57:03 PM
Today I've received numerous emails, texts, PMs, and phone calls asking my thoughts and opinions on today's 14C filing in which the company notified its shareholders that the amount of authorized shares increased over 65% from 150 million to 250 million. To be blunt, I was disappointed with today's news. I fully expect the PPS to take a hit tomorrow as CHP and the gang work their magic, though I hope I'm wrong. Not everything ScripsAmerica does will be positive, and we will not always agree with the decisions the company makes from time to time. That said, I'm not selling my 2 million shares, as I sincerely believe much better news is just around the corner.
As Bob pointed out during my rant with him this evening (he's probably not too happy with me for such rant), this is merely an increase in the authorized shares, not the outstanding shares. Bob also said the company "has not made any plans to issue other shares." So in reality, what we have is an increase in the number of shares the company is "authorized" to make. To error on the side of caution, however, I will increase the number of outstanding shares in all my future longterm price projections from my prior 150 million assumptions to 200 million shares, which is about 75 million more shares than the company reported two weeks ago. For am example of how this will impact my most recent projections, below is my stickied post with the new 200 million OS assumptions in italics and bold. (Note to management, this is NOT to be read as a Bsav88atty endorsement for issuing an additional 75 million shares.) As you will see, my PPS projections drop a little, but not by a significant amount...
ScripsAmerica still has at least seven potential revenue streams (excluding the DOD revs). At least three of these revenue streams will be generating revenues in May -- Main Ave Pharmacy, WholesaleRx, and RapiMeds Hong Kong. Below are my projected May revenues and NET PROFIT for each (yes, I'm predicting the company will turn a profit and prove all the iHub bashers wrong once and for all):
1. Main Ave Pharmacy - $750,000 ($353,400 to SCRC per disclosure the 10K -- $750K Xs 97% Xs 20% estimated sales commission based on industry norms Xs 30% for all Main Ave expenses identified in the agreement that Flyers posted on iHub (thanks, Flyers for posting details, very helpful!) - minus $54K monthly payment to Mr. Fox based on $30 Xs 250 scripts in April -- I do not know how much to include for the "Finance Fee" that is to be paid to SCRC per the agreement, so I will ignore it to be conservative. I understand that it in the compounding pharmacy industry, the profit margins are "extremely favorable" per the core's research and the company's Q&A. So the 70% profit margin that I have assumed here is reasonably attainable.)
2. WholesaleRx - $400,000 ($56,000 - 70% gross margin, 20% of gross margin to SCRC -- This is based on prior filings and appears to be pure profit.)
3. PIMD - $0 (unfortunately, it is earning $0 per the 10K; this was my biggest disappointment from the 10K, hopefully, the company can get moving with this in June as stated in the 10K.)
4. RapiMed Hong Kong -$200,000 ($200,000 to SCRC, assumes no more orders in May; I will assume 30% profit margin, so $60,000 to the bottom line. This is another revenue stream that has been much slower to develop than initially anticipated. Perhaps it will ignite in 2H FY14.)
5. RapiMed Mainland China - $0 (product approval possibly as early as June, same comments as Hong Kong)
6. RapiMed Canada - $0 (no updates, probably nothing until the second half of 2014)
7. RapiMed US - $0 (not my favorite potential stream of revenue)
An eighth potential revenue stream is the Global Pharma Hub, but I'll ignore that one as well.
So in May, excluding the DOD revenues and the "financing fees" from Main Ave, I am projecting revenues of $609,000 to SCRC and $469,400 of gross profit. I'll further assume $200,000 for SG&A, which translates to about $269,400 in NET PROFIT. Assuming no further increases, my net profit/earnings estimate would equate to $3,232,800 through April 30, 2015. I will further assume the total shares outstanding increases to 150,000,000, so eps of $0.02, and a PE of 20 (which is uber conservative for such explosive growth). If I am correct, May's earnings would support a pps of at least $0.40. I do not, however, expect the status quo. I expect much more growth.
New assumption: I will further assume the total shares outstanding increases to 200,000,000, so eps of $0.016, and a PE of 20 (which is uber conservative for such explosive growth). If I am correct, May's earnings would support a pps of at least $0.32. I do not, however, expect the status quo. I expect much more growth.
Indeed, I believe May will be the tip of the iceberg as Scrips continues to grow and fill in all seven of its potential revenue streams (again, excluding the DOD revenues, Main Ave "financing fee", and Global Pharma Hub). For example, if Scrips was able to grow only the Main Ave Pharmacy monthly revenues to $2,000,000 based on 700 scripts (as the Atlanta compounding pharmacy monthly revenues that Guts discovered last week), SCRC's monthly revenues would be $1,342,400, its gross profit about $1,202,400, and net profit of about $1M -- or $12M in net profit over 12 months. (This is pre-tax, and I'll have to find the NOL carry forward to determine a more accurate net earnings.) Applying the same numbers as above (e.g., 150M OS, 20 PE), would yield an eps of $0.08 and a corresponding stock price of $1.60.
New Assumption: Applying the same numbers as above (e.g., 200M OS, 20 PE), would yield an eps of $0.06 and a corresponding stock price of $1.20.
Incidentally, if the company was to issue 75 million shares tomorrow at a dime, that would equate to over $7 million to the company after commissions, underwriter fees, and other fees and expenses. I understand a portion of these shares will be used to compensate management and be reserved for the preferred share conversions, but I believe it is safe to assume the company would have at $4 million to which it could use for accretive acquisitions, further accelerating the company's amazing growth. Indeed, it is not difficult for me to imagine a scenario where Team Scrips could put together a few more acquisitions to double, triple or even quadruple my projected revenues and, thus, an even higher stock price than I estimated above. So, while things do appear a bit grim now, in my humble opinion, we are very close to breaking out. Indeed, despite the ugly 2013 10K and today's increase in the AS, I sincerely believe 2014 will be an exciting year to be a Scrips shareholder. Hang in there everyone, we will soon have ignition and liftoff (albeit a bit more selling pressure before liftoff)!
Good luck!
Bsav88atty
P.S. I did not get paid to write this message, nor have I been paid to post any message at any time on any board.
As Bob pointed out during my rant with him this evening (he's probably not too happy with me for such rant), this is merely an increase in the authorized shares, not the outstanding shares. Bob also said the company "has not made any plans to issue other shares." So in reality, what we have is an increase in the number of shares the company is "authorized" to make. To error on the side of caution, however, I will increase the number of outstanding shares in all my future longterm price projections from my prior 150 million assumptions to 200 million shares, which is about 75 million more shares than the company reported two weeks ago. For am example of how this will impact my most recent projections, below is my stickied post with the new 200 million OS assumptions in italics and bold. (Note to management, this is NOT to be read as a Bsav88atty endorsement for issuing an additional 75 million shares.) As you will see, my PPS projections drop a little, but not by a significant amount...
ScripsAmerica still has at least seven potential revenue streams (excluding the DOD revs). At least three of these revenue streams will be generating revenues in May -- Main Ave Pharmacy, WholesaleRx, and RapiMeds Hong Kong. Below are my projected May revenues and NET PROFIT for each (yes, I'm predicting the company will turn a profit and prove all the iHub bashers wrong once and for all):
1. Main Ave Pharmacy - $750,000 ($353,400 to SCRC per disclosure the 10K -- $750K Xs 97% Xs 20% estimated sales commission based on industry norms Xs 30% for all Main Ave expenses identified in the agreement that Flyers posted on iHub (thanks, Flyers for posting details, very helpful!) - minus $54K monthly payment to Mr. Fox based on $30 Xs 250 scripts in April -- I do not know how much to include for the "Finance Fee" that is to be paid to SCRC per the agreement, so I will ignore it to be conservative. I understand that it in the compounding pharmacy industry, the profit margins are "extremely favorable" per the core's research and the company's Q&A. So the 70% profit margin that I have assumed here is reasonably attainable.)
2. WholesaleRx - $400,000 ($56,000 - 70% gross margin, 20% of gross margin to SCRC -- This is based on prior filings and appears to be pure profit.)
3. PIMD - $0 (unfortunately, it is earning $0 per the 10K; this was my biggest disappointment from the 10K, hopefully, the company can get moving with this in June as stated in the 10K.)
4. RapiMed Hong Kong -$200,000 ($200,000 to SCRC, assumes no more orders in May; I will assume 30% profit margin, so $60,000 to the bottom line. This is another revenue stream that has been much slower to develop than initially anticipated. Perhaps it will ignite in 2H FY14.)
5. RapiMed Mainland China - $0 (product approval possibly as early as June, same comments as Hong Kong)
6. RapiMed Canada - $0 (no updates, probably nothing until the second half of 2014)
7. RapiMed US - $0 (not my favorite potential stream of revenue)
An eighth potential revenue stream is the Global Pharma Hub, but I'll ignore that one as well.
So in May, excluding the DOD revenues and the "financing fees" from Main Ave, I am projecting revenues of $609,000 to SCRC and $469,400 of gross profit. I'll further assume $200,000 for SG&A, which translates to about $269,400 in NET PROFIT. Assuming no further increases, my net profit/earnings estimate would equate to $3,232,800 through April 30, 2015. I will further assume the total shares outstanding increases to 150,000,000, so eps of $0.02, and a PE of 20 (which is uber conservative for such explosive growth). If I am correct, May's earnings would support a pps of at least $0.40. I do not, however, expect the status quo. I expect much more growth.
New assumption: I will further assume the total shares outstanding increases to 200,000,000, so eps of $0.016, and a PE of 20 (which is uber conservative for such explosive growth). If I am correct, May's earnings would support a pps of at least $0.32. I do not, however, expect the status quo. I expect much more growth.
Indeed, I believe May will be the tip of the iceberg as Scrips continues to grow and fill in all seven of its potential revenue streams (again, excluding the DOD revenues, Main Ave "financing fee", and Global Pharma Hub). For example, if Scrips was able to grow only the Main Ave Pharmacy monthly revenues to $2,000,000 based on 700 scripts (as the Atlanta compounding pharmacy monthly revenues that Guts discovered last week), SCRC's monthly revenues would be $1,342,400, its gross profit about $1,202,400, and net profit of about $1M -- or $12M in net profit over 12 months. (This is pre-tax, and I'll have to find the NOL carry forward to determine a more accurate net earnings.) Applying the same numbers as above (e.g., 150M OS, 20 PE), would yield an eps of $0.08 and a corresponding stock price of $1.60.
New Assumption: Applying the same numbers as above (e.g., 200M OS, 20 PE), would yield an eps of $0.06 and a corresponding stock price of $1.20.
Incidentally, if the company was to issue 75 million shares tomorrow at a dime, that would equate to over $7 million to the company after commissions, underwriter fees, and other fees and expenses. I understand a portion of these shares will be used to compensate management and be reserved for the preferred share conversions, but I believe it is safe to assume the company would have at $4 million to which it could use for accretive acquisitions, further accelerating the company's amazing growth. Indeed, it is not difficult for me to imagine a scenario where Team Scrips could put together a few more acquisitions to double, triple or even quadruple my projected revenues and, thus, an even higher stock price than I estimated above. So, while things do appear a bit grim now, in my humble opinion, we are very close to breaking out. Indeed, despite the ugly 2013 10K and today's increase in the AS, I sincerely believe 2014 will be an exciting year to be a Scrips shareholder. Hang in there everyone, we will soon have ignition and liftoff (albeit a bit more selling pressure before liftoff)!
Good luck!
Bsav88atty
P.S. I did not get paid to write this message, nor have I been paid to post any message at any time on any board.
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